Thursday, September 07, 2017

The House easily passed a bill that would require the SEC to amend Regulation A with respect to issuer qualifications and Exchange Act reporting requirements. The House also passed a bill by an equally large margin that would extend the term of the independent insurance member on the Financial Stability Oversight Council.

Regulation A offerings. The Regulation A bill (H.R. 2864), sponsored by Kyrsten Sinema (D- Ariz) advanced by a vote of 403-3 after moving through the House Financial Services Committee 59-0 in July. Rule 251 of Regulation A currently provides that an issuer of securities must satisfy a variety of requirements, including that the issuer is not subject to reporting under Exchange Act Sections 13 or 15(d) immediately before the offering. The Sinema bill would direct the Commission to revise Rule 251 to remove this requirement.

Moreover, the Sinema bill would direct the Commission to amend Rule 257 of Regulation A to provide that an issuer in a Tier 2 offering that is subject to Exchange Act Sections 13 or 15(d) meets the reporting requirements of Rule 257 if the issuer meets the requirements of Exchange Act Section 13. Currently, Rule 257 requires a Tier 2 issuer to file periodic and other reports with the Commission on Forms 1-K, 1-SA, and 1-U. Tier 2 offerings are the result of changes the Commission made to Regulation A in 2015 to provide for offerings to qualified purchasers of up to $50 million with state Blue Sky registration and qualification laws preempted for these offerings.

FSOC independent member term. The Financial Stability Oversight Council Insurance Member Continuity Act (H.R. 3110) likewise passed by a wide margin. The bill, sponsored by Randy Hultgren (R-Ill), was reported by the House FSC unanimously in July and would amend the Financial Stability Act of 2010 to provide that the FSOC’s independent member with insurance expertise may continue to serve until the earlier of 18 months after his term ends or his successor is confirmed.

According to a statement by Hultgren, the bill offers lawmakers a chance to fill a gap in the Dodd-Frank Act. “Absent the appointment and confirmation of a successor, the expiration of the Independent Member’s term would leave the Council without a voting member who has insurance expertise because Dodd-Frank did not make clear if the position can be filled by an acting official.”

As enacted, the Dodd-Frank Act includes among its voting members an independent member who, in addition to having an insurance background, must be appointed by the president and confirmed by the Senate and who serves for a six-year term. A related Senate bill (S. 1463) is due to be marked-up tomorrow.